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After nearly a half-century, support for Medicare is growing frail

This article first appeared in the St. Louis Beacon, June 13, 2011 - Nearly half a century ago, President Lyndon B. Johnson flew to Independence, Mo., to sign the Medicare bill, a far-reaching piece of legislation that many agreed would bring hope and peace of mind to elderly Americans. Johnson chose Independence for the ceremony because it happened to be the hometown of Harry S Truman, the first president to propose federal health insurance under Social Security. The bipartisan consensus that helped to give birth to Medicare is slowly fading as the program approaches its 46th anniversary on July 30. If there is a celebration at all, the discussion is likely to focus on whether the nation can afford the program in its existing form.

That question has become a hot political topic due to the push by many Republicans and Tea Party members to cut spending for many programs, including Medicare, to address concerns about deficits and debt. Meanwhile, Medicare's trustees have added urgency to the debate about Medicare's future by projecting that existing taxes for the hospital portion of the program won't be sufficient to cover benefits beyond 2024.

What Medicare Provides

Medicare provides health insurance for more than 47.5 million people, including more than 992,000 Missourians. The program covers insurance for hospital care, known as Part A, and optional insurance for Part B, which covers visits to doctors, medical tests and some other outpatient services. Enrollees are required to pay a monthly premium of $115.40 for Part B services. Seniors are also given the option of a private health plan that contracts with Medicare to provide Part A and Part B services.

While choosing the private plan, known as Part C, is cheaper for some enrollees, most choose traditional Medicare. Some have complained of difficulty in finding doctors who accept Part C payments. In addition, federal studies have shown that Part C contractors tend to receive higher payment rates even though the medical outcomes are no better than traditional Medicare. Finally, enrollees can buy optional insurance to cover outpatient prescription drugs, known as Part D. Patients spend an average of $31 a month for Part D.

Some new proposals have emerged from the discussion about Medicare's future. The most extensive one has come from Rep. Paul Ryan, R-Wis., who wants to rewrite the health contract with the elderly. In place of Medicare's guaranteed medical benefits and direct payments to providers, Ryan's plan would offer each senior a certificate, or voucher, worth a set amount of money to buy private health insurance, beginning in 2022. Some politicians have praised Ryan, saying he has been courageous enough to put ideas on the table while Democrats sit on their hands and treat the issue like a hot potato.

In announcing his plan, Ryan argued that "real reform -- especially with respect to Medicare -- must eliminate unsustainable waste and reduce inefficiencies and costs by giving beneficiaries more control over their own health-care benefits and decisions."

On the other hand, the Kaiser Family Foundation says Ryan's plan, called the Path to Prosperity, would impose a higher cost on seniors. The report says the plan would mean a typical retiree in 2022 would see out-of-pocket health expenses rise to $12,500 or 49 percent of a Social Security check, compared to $5,600 or 22 percent under the current program.

Stripping Out The Politics

Dean Edward Lawlor, founding director of Washington University's Institute for Public Health, is author of a book, "Redesigning the Medicare Contract," and several articles on various aspects of Medicare.

He is dismayed by talk about Medicare going broke or facing bankruptcy. He called it political rhetoric while conceding that Medicare faces problems in that expenses are rising faster than funding.

"But to treat it like there's an account there that's going to run out of money and the program is going to stop is a scare tactic. I think it's just the wrong way to think about this problem."

He notes that the hospital portion financed through payroll taxes accounts for much less than 50 percent of money for Medicare.

"That's primarily the source of this controversy," he says, and there seems to be little acknowledgement that the rest of the money comes from taxes, general revenue from the federal budget, along with contributions or premiums paid by beneficiaries.

Lawlor says Medicare needs to be regarded like any other public program. "Money has to come in through taxes and other types of funding. We don't think about the Defense Department going bankrupt. But we've uniquely attached this language to Medicare and to Social Security."

That's not to say the program doesn't have issues that need to be addressed, he says. These include the fact that the program hasn't kept pace with social and economic circumstances that have changed since the program was first established.

Moreover, he says the program now serves two sets of elderly enrollees. One is the group whose members are 85 and older. They are afflicted with acute illnesses, such as heart disease, cancer and stroke, he says. The other group consists of an estimated 5 million to 6 million baby boomers who will be coming into the system each year.

The trouble is that the program is more focused on treating acute cases through hospitalization and fails at addressing chronic illness to keep people out of hospitals. This is a shortcoming that adds to Medicare's cost, Lawlor says.

One compelling statistic that drives home his point is that is that about a quarter of Medicare beneficiaries have five or more chronic conditions, and they account for two-thirds of Medicare spending.

"There are things we can do to make this system more appropriate with better quality at lower cost," Lawlor says. "I would encourage us to focus the discussion more in that direction and less on those kind of magic, ideological schemes, like a voucher system."

Echoing Lawlor's point was Jonathan S. Skinner, a professor of economics at Dartmouth.

"The problem is that there is more Medicare spending per person," he says. "The cost per elderly person has gone up a lot. That's really key."

Getting Better Care For The Buck

Skinner was among scholars who did a revealing study of sharp differences in Medicare spending between beneficiaries in McAllen and El Paso, both in Texas. The study found that spending in McAllen was 86 percent higher than in El Paso and was 75 percent above the national average without corresponding improvements in outcomes. The study also found that McAllen residents were more likely to be admitted to a hospital, more likely to die in one, more likely to be seen near the end of their lives by more than 10 doctors. The study suggested that this high number of physicians was an indication of fragmented service and a lack of coordination in care.

The higher cost of medical services for the elderly in McAllen also raised questions about the value of some of the care during the last years of life, argues Sidney Watson, a Saint Louis University law professor.

"One thing we need to learn as caregivers and society is how to make sure that people get the care that they want and allow people to make the choices that they want," she says. She adds that time and payments should be provided to doctors to discuss these issues with patients with terminal illnesses.

"The practical solutions that don't make headlines are models of hospital care, models of terminal care to help the patients have quality time with families," Watson says. "We know from experience that in hospices people feel supported. They feel cared for and it also provides care at a very reasonable cost."

The Cost Of Care Here Is Near Average

Following the Skinner's study, federal policymakers have taken a closer look at sharp differences in regional use of Medicare services.

Recent data from Kaiser show that spending per Medicare beneficiary in St. Louis is $8,848, for example, while spending for Miami was $18,199. St. Louis' rate was slightly below the national average while Miami's was 200 percent above it.

Looking at Miami's figures, Skinner says fraud is one problem the feds need to come to grips with in Miami, along with the tendency of providers in some regions to encourage heavy use of services to reap higher reimbursements. He says he's not exaggerating when he says Miami seems to be filled with "lots of clinics and medical buildings on every corner. If there is something wrong, you see a doctor. People go to multiple doctors. Taxpayers are paying for this, and doctors are happy to encourage this kind of behavior. And there is really nothing to slow it down either."

And it won't slow down, Skinner argues, until payments are based in part on clinical evidence that the treatment is effective.

"That would make people think twice. You don't want to tell people they can't have a certain service, but if there is no clinical evidence that the service is effective, let them pay for it. Maybe we'll also want to set guidelines and think about reducing payments when we find these hotspots where spending is really high."

Another thing Medicare needs to do is learn from retailers.

"Look at Walmart," Skinner says. "They are as efficient as they can possible be. We need to make sure there are incentives to innovate and deliver health care in a more efficient and smarter way."

Looking For Effective Outcomes

Echoing the philosophy of leaders of the St. Louis Business Health Coalition, Skinner says the system should pay providers for effective outcomes rather than number of services.

Many organized health-care systems would "welcome the opportunity to get fixed payments because they know how to save money. But there are no incentives to save money. There are only incentives to do more because if you do more you have to get paid more. The converse is that if you had a better way to treat somebody by keeping them out of the hospital, you'll lose money."

He notes that Ryan's plan wouldn't affect anyone 55 and older but would allow people in that age group and older to keep their existing Medicare. He dismisses the plan as a "non-starter. It would cut costs and pull the rug out from Medicare enrollees and not do anything for the next 10 years. I'm 55 and I wouldn't even be subjected to this thing. It doesn't affect most of the people who are going to be on Medicare for the next 40 years. What's up with that?"

Watson, meanwhile, takes issue with those who say the entire Medicare system is going broke. She concedes that the payroll tax that funds the hospital portion of Medicare is projected to reach a deficit.

"But we can prevent that from happening by increasing payroll deductions, making them higher for higher-income Americans or simply by using general tax revenue. It's not as if something's going to happen tomorrow with Medicare."

In a recent series in the Columbia Journalism Review, writer Trudy Lieberman noted that asking higher enrollees to pay more would not be unprecedented. She notes that higher-income individuals earning more than $85,000 a year already pay higher premiums for Part B services.

Like others, Lawlor says technology is another cost-driver.

"That's a lot bigger than the aging of the population. Looking over a long period of time, the next 25 years or so, people believe Medicare is going to grow from about 4 percent of GDP to about 7 percent. That's a lot, but again it's not catastrophic. That's a 3-percentage point increase. About 1 percentage point of that is due to aging, and about 2 percentage points of it is due to technology."

The answer he says is for Medicare to have a system in place to help the federal agency make wise decisions about technology.

Harlan Steinbaum, former CEO at Express Scripts, says the issue is too important to be left to politicians.

"I'm a senior on Medicare now," he says. " The quality of care is excellent and I wouldn't want to see that diminished."

But he says something needs to be done about fraud and abuse. He wished there was a way to form a committee of "hard-hitting dedicated business people, insurance people and medical people who really understand disease to sit down and get all the politics out. Hopefully, they could come up with things that would keep the quality up and save money at the same time."

Funding for the Beacon's health reporting is provided in part by the Missouri Foundation for Health, a philanthropic organization that aims to improve the health of the people in the communities it serves.